In the textile town of Bhiwandi, 35 kilometres from Mumbai, dingy, winding, swampy lanes lead to localities humming with noise from power looms.
Here, Riten Gada runs Arihant Weaving Mills, a dilapidated two-storied structure with wooden floors and staircases. Gada's father started the mill 50 years ago. The power loom business did well for the next several decades - the factory's 16 looms weaved 2.5 lakh metres of fabric a month, directly and indirectly employing 25 people per loom.
But with the economic slump, most of Gada's looms have fallen silent. Less than 10 workers attend to those that are still running. From weaving 2.5 lakh metres of fabric a month, the factory now barely manages 70,000 metres. More than a lakh metres, already woven, are stocked up in a godown, on the factory's second floor. Even in the midst of the festive season, there were hardly any orders from garment makers who earlier procured woven fabric from Kalbadevi in Mumbai, Surat and Ahmedabad. The payments cycle, for those who still procure Gada's fabrics, has stretched to 240 days from 30-90 days earlier. His troubles may have begun in December 2016 after the Government of India announced demonetisation of all Rs 500 and Rs 1,000 banknotes, but the slowdown has truly taken Arihant into its grip. Soon, Gada plans to exit the weaving business and try something new.
Gada's isn't an isolated case. Many power looms in Bhiwandi have seen a sharp erosion of business, leading to loss of employment.
Bhiwandi used to be one of India's largest power loom hubs with 10 lakh looms that employed an estimated 2.5 crore people till about three years ago. Each loom employs two people directly but indirect employment adds up to about 23 per loom - besides direct employment, the power loom business engaged dyeing units, printing units, spinners, traders, and garment sellers in Gujarat and Mumbai.
Half of these looms have shut down over the past three years, according to different industry associations. "May be five lakh looms are running, employing two-three lakh weavers directly now," says Puneet Khimasia, a leader of the Bhiwandi Weaving Association. "Most weavers are migrant workers, who go to their villages after Diwali. Many of them will not return as there is no work," he adds.
Hard times are here for workers not just in textiles but across most manufacturing industries. India's industrial production went into the negative territory (-4.3 per cent) for the first time in three years in September, the lowest in nearly eight years, as output slumped in manufacturing, mining and electricity sectors. Production cuts in the auto industry due to slump in demand have vaporised many contractual jobs. A prolonged downturn in the residential real estate sector has been bad news for industries such as steel and cement. On the services side, export-led industries such as information technology services are still hiring but the threat of automation and disruptions due to other exponential technologies such as Artificial Intelligence is beginning to threaten many white-collar roles.
The Centre for Monitoring Indian Economy (CMIE), which maintains business and economic databases, conducts an unemployment survey with a sample size of 1,74,405 households. The survey indicates that in calendar year 2018, the number of people employed shrunk by nearly 10 million. In December 2017, about 406 million were employed; that number was 396 million by December 2018. India's unemployment rate in October 2019, at 8.45 per cent, was the highest since August 2016, when it had hit 9.59 per cent. Unemployment rates in states such as Tripura (27.2 per cent), Haryana (23.4 per cent) and Himachal Pradesh (16.7 per cent) are very high. India's largest state, Uttar Pradesh, has an unemployment rate of 10.1 per cent.
Rating agency CARE Ratings studied annual reports of 1,938 companies across sectors to estimate employment generation in India's corporate sector. Annual reports mostly disclose on-roll employees and not those on contract.
The study found that aggregate headcount inched up at a CAGR of 3.3 per cent in the four years between 2014/15 and 2017/18. The GDP, however, grew at 7.5 per cent per annum. "Ideally, the rate of growth in employment should be linked with growth in GDP?employment growth has not been commensurate with GDP growth with a difference of 4.2 per cent in CAGR during this period," the agency stated.
The core industries (mining, iron & steel, crude oil, construction materials) have witnessed negative growth in headcount, impacted by the slowdown in GDP as well as challenges on the NPA side for banks. Heavy investment industries such as capital goods and power also show shrinking employment. Other industries with a sharp downtrend in headcount include telecom (down 7.1 per cent CAGR), agri (down 4.9 per cent), and hospitality (down 3.6 per cent).
"Never seen this kind of mandi (slowdown)", Manesar, Haryana
Sales in the automobile industry have declined every month since December 2018. Manufacturers cumulatively produced 15 per cent less vehicles during April-October compared to last year. When cars, two-wheelers and truck makers make fewer vehicles, the pain is spread around the thousands of component makers that supply parts to these companies. Therefore, the estimated number of people who have lost jobs in this industry is staggering. Nearly 4,00,000 people across the country have lost their jobs since April, auto experts estimate. This includes about 2,32,000 people at vehicle dealerships that have either scaled down or downed shutters. In the past two years, about 300 dealerships have closed. Maruti has so far shed around 3,000 temporary workers while utility vehicle maker M&M has let go 1,500 temporary staff.
The mood in villages around the Gurgaon-Manesar industrial belt, one of the biggest automobile hubs in the country, is expectedly sombre. "I used to have a regular job with a salary of Rs 12,000 at a forging unit in Sihi (a village) till June. I was retrenched in July and have not been able to find regular employment ever since," says Vipul Sutariya, 25, hunched next to a tea shop in one of the bylanes of Kasan village in Manesar. A native of Tejan village in Ambala district, he says he does not have an option to go back to his village as he will not find any work there either. "Many workers have gone back to their villages," says Ram Asrey, the 42-year-old tea shop owner. "I have never seen this kind of mandi (slowdown)." Asrey had himself migrated from Rohtak and set up the shop in 2010.
Manesar became an industrial hub in 1999, when Honda Motorcycle and Scooter India set up its first factory here. Maruti opened its second car factory in the region in 2007. Over the years, dozens of ancillary units sprung up.
"Manesar came out of nowhere in the last 15 years. It used to be a dusty stopover for trucks on way to Jaipur from Delhi. Today, it is a bustling township," says Ravi Patel, owner of a grocery in Aliyar village. "This is the first downturn the area is witnessing, and it is intense," he adds. Buildings in the region that rent out accommodation to workers lie vacant as many contract workers have returned to their villages after being laid off. "It has also affected my business. Workers are my customers, and with so many of them gone, demand for my goods has gone down," says Patel.
Similar stories echo more than 2,000 kms away, down south in Chennai, another automobile hub. Factories of auto makers such as Ford, BMW, Hyundai, Renault-Nissan, Ashok Leyland, Daimler, TAFE and Royal Enfield are spread around the city. For the past 26 years, K. Munisamy, 50, has been following a routine. Every morning, in a blue shirt and trousers, he starts work at one of the milling units of an auto parts maker in Chennai. He clocks in eight hours before going home. "During good times, I used to work overtime and earn more," says the father of two. He supports a six-member family, including his parents. "I used to earn enough (Rs 22,000 a month) to meet the expenses, but that will now change," he says. His colleague, Kumar, 35, is in a similar situation. "My children are in school and my wife doesn't have a job. I am the only earning member in my family (he earns about Rs 17,000 a month) and I have to search for a job now," he says. "This is a bolt from the blue." Their employer, a valve maker in Chennai's Ambattur Industrial Estate, shut operations last month.
The component industry contributes 2.3 per cent to India's GDP and 25 per cent to its manufacturing GDP, and its prospects mirror the domestic vehicle industry, its main client. "The auto industry employs about five million people and 70 per cent of it is contractual in nature," says Vinnie Mehta, Director General, Automotive Component Manufacturers Association (ACMA). "That is where retrenchments have begun but it is likely to get worse if the slowdown persists. We are looking at a possible 15-20 per cent reduction in workforce if things do not improve soon," he says.
Things are unlikely to get better anytime soon. The automobile industry is bracing itself for the transition from BS IV to BS VI emission norms, which means its inventory of BS IV vehicles needs to be depleted to zero by March 2020-end. This could result in another round of steep production cuts between now and February. At the same time, BS VI vehicles will cost significantly higher than the BS IV ones, which could hit consumption further.
India's current economic slump, meanwhile, comes at a difficult demographic transition. Employment generation is far tougher now because of the number of working age population joining the workforce every month. The World Bank's South Asia Economic Focus Spring 2018 report stated that between 2015 and 2025, India's working age population, or those above the age of 15, would expand by 1.3 million a month. India, therefore, needs to create millions of jobs a year. How many millions depends on the estimates of the employment rate. Not everyone in the working age population works. The World Bank calculates the share of the working-age population that is at work at 50 per cent. India, the report stated, would need to create more than eight million jobs a year to maintain the same level of employment rate.
Maintaining this sort of employment rate would be difficult without support from India's automotive industry, which contributes about 49 per cent to the manufacturing GDP. The $119 billion domestic automobile industry is in the midst of its worst slowdown, ever.
"There is no respite", Ludhiana, Punjab
Punjab's largest city, Ludhiana, also makes things that move. The humble bicycle is its most famous product. More than 100 factories manufacturing bicycle and bicycle parts have shut shop in recent years. On an average, each unit employed an estimated 30-40 people.
CMIE data of October 2019 shows that Punjab has worse unemployment at 13 per cent than UP (10.1 per cent) and Bihar (12.7 per cent).
The city's industrial cluster, which has around 8,000 companies, also makes auto components, hand tools, plywood, sewing machines and textiles. The economic slump has impacted many of these industries. The cluster employs an estimated 15 lakh people every year. However, most factories are currently operating with 30 per cent less manpower. There is less demand and an excess of labour.
Gurmeet Singh Kular is President of the Federation of Industrial and Commercial Organisation (FICO), Ludhiana. He is also a manufacturer of bicycle parts. "There is no respite from the slowdown. It has never been so bad ever in my life," he quips. "The auto sector and sewing machine makers are facing a slowdown. However, machine tools are doing okay because the industry works on advance payment," Kular says and adds that Ludhiana is beginning to see job losses, both among regular and contract workers. "We are dependent on migrant labourers from Bihar and UP. Diwali is our peak season. Therefore, there is usually a shortage of labour during this season. However, this year, there was no shortage," he says.
Kudu Knit Process in Ludhiana is a knitted goods company that produces fabrics for summers and winters. "We normally get three repeat orders from our customers during the summers, and once during the winters. Last year, we missed one summer season's business or one quarter of the business due to demonetisation and GST," says Varun Mittal, director of the company. Mittal's company deals with semi-organised and unorganised customers who work mostly in cash.
"We feel that after demonetisation and GST, people downstream (semi-organised and unorganised companies), which is a large part of our customer base, had huge issues. One, they did not have a good amount of white capital. Second, they faced documentation and clerical challenges for adjusting to the new GST system," he says.
Mittal used to offer customers credit for three months during the pre-GST, pre-demonetisation era. After these steps by the government, his customers' cash flows were impacted and the credit cycle expanded to almost five months. "We are trying to convince ourselves that it is over, but it is not. There are aftershocks and they are going to be around for some more time," he says.
"This money isn't enough", Jangaon, Telangana
The Jangaon region, one of the more important handloom clusters of Telangana, is known for its Ikat weaving. Around 1,000 looms were at work here in the early 2000s. Now, it is down to a little less than half that number, according to one estimate.
Narasimha Reddy Donthi, an independent textile policy expert, who has seen the number of looms in Jangaon decline to around 400 five years ago from about 1,000-odd in early 2000s points to the 4th and 3rd Handloom Census (2019/20 and 2009/10). "The number of handloom workers has shrunk from 43,31,876 in 2009/10 to 35,22,512, an 18 per cent decline. Employment in the handloom sector is witnessing a clear fall," he says.
Weavers are leaving the vocation because it is no longer lucrative or sustainable. Fabric making is moving towards mechanisation. This also points to a connected nuance of India's employment nightmare - underemployment. Residents of a weavers' colony in Jangaon town, about 100 kms from Hyderabad, would much rather opt for another job since earnings from weaving alone are not good enough for their households. Nevertheless, finding another high paying job isn't easy.
Gonne Narender, 34, wants a better future for his household of six. He weaves Pochampally sarees but now finds himself stuck. Over the last few years, he tried many jobs, including selling soaps and working at a local kirana store. When his life did not change materially, he went back to weaving. "Weaving is the only art I know and it lets me be with my family," he says. Today, his family earns around Rs 12,000 a month with each adult member contributing. His wife helps with the yarn preparation while his mother makes beedis. "This money isn't enough. I have not yet factored in expenses that I will have to incur when I begin sending my daughters to school," he says.
Like Narender, Bikshapati Enagandula, about 40 years old, tried his luck in Hyderabad as a carpenter before returning to being a weaver. This underlines the need for re-skilling. Many workers are stuck with a single skill and must be trained for industries that are on the rise.
One attraction for those who return to being weavers are government subsidies. Jangaon's weavers get both state and central subsidies. "Today, there are several government schemes for weavers and many are able to get a Mudra loan to buy a loom. There is subsidy on yarn. The latest incentive is pension of Rs 2,000 a month for those over 50 years. However, the only problem is that there is a lot of paperwork and it is a time-consuming process," says Gurram Nagaraju, president of a weavers association in Jangaon.
"My customer owes me Rs 3 crore", Bhiwandi, Maharashtra
At 5.6 per cent, Maharashtra has a lower unemployment rate than the national average, according to data from CMIE. Nevertheless, there are pockets within the state's industrial clusters that are in turmoil due to the downturn.
Bhiwandi's industrial belt is among them, dominated not just by power looms but a whole range of small businesses in engineering, printing and packaging businesses. The region has between four and five lakh factories that employed 10 lakh people. Conversations with industries here suggest that the cluster may have shed 20 per cent of its manpower in recent years.
At Wada, near Bhiwandi, at least 100 steel rolling mills have downed shutters over the past two years. At the denim garment manufacturing hub of Ulhas Nagar in Mumbai, numerous units are on the verge of closure. This is bad news for the millions of youth who enter the workforce every year.
BT also visited Ambernath, part of the Mumbai Metropolitan Region. Here, at a plastic bottle manufacturing machines unit, over 200 machines were lying idle. The factory has stopped production because of the inventory overhang. In this region, there are numerous foundries that closed shop as well.
Ninad Jaywant assembles trouser belts, selling it to popular fashion brands. The leather is imported from Italy while the buckles come from China. He ran his company, Kangaroo Leather, from Dharavi in Mumbai, but relocated to Pimplas village on the outskirts of Bhiwandi a decade ago, employing about 40.
Jaywant is worried. He needs nearly Rs 1 crore to pay for bonus, salary and other establishment costs. But things aren't going well. A well-known brand, a customer for 22 years, is ready to place a Rs 2 crore order. But this customer already owes him over Rs 3 crore, an amount that has remained unpaid for months. "I am stopping supplies because I fear I will not get my money in the near future," says Jaywant. "My business has gone down by over 30-40 per cent," he adds. When Business Today visited his factory, it had less than 10 employees. "The rest will come back when we get more orders," says the owner.
Sandeep Parikh, Vice President of Mumbai-based Chamber of Small Industry Association (COSIA), an umbrella organisation of nearly 70 MSME associations in the country, says few have data on employment in the state's MSME sector. "Most of these units employ daily labourers. They get their wages only if there are orders," he says. Large layoffs, he adds, have been witnessed in engineering, construction, textile and electrical sectors, among others. "Now, I can employ a mechanical engineer with two years experience for Rs 15,000. I had to pay double the amount two years ago," Parikh says.
"BSNL/MTNL shed 90,000", NCR/Bengaluru
There is better news on jobs from the IT/ITeS and start-up hubs of Bengaluru and Gurgaon. Large e-commerce and food-tech companies are beefing up their logistics operations, which is good news for delivery and warehousing jobs. Flexible hiring, or employment with a short, fixed-term contract of six months to a year, spiked as companies strengthened their logistics and sales teams in preparation for the festival season, which starts with Onam and ends after Christmas in India.
Rituparna Chakraborty, President of the Indian Staffing Federation and Co-founder at staffing firm TeamLease, told Business Today that compared to the same period (the holiday season) last year, the flexi-hiring industry has witnessed a jump of 10-15 per cent in demand. "The demand for temporary hiring is coming from e-commerce, fintech, banking and financial services as well as some consumer sectors. It may not be a huge, but there is clearly a surge," she says.
While some large companies in the India's IT services industry are going through turbulent times, the industry as a whole is still hiring in large numbers. Keshav Murugesh, Group CEO of WNS and Chairman of IT industry body Nasscom, says that the industry expected net hires to total about 1.2 lakh last year. The industry ended up hiring about 1.7 lakh. "The good news is that in the first quarter of this year, 85,000 net new hirings have taken place. This is a positive trend. From Nasscom's point of view, we are cautiously optimistic in terms of the overall year - it appears to be trending better than the previous year," he says.
Nevertheless, companies such as Cognizant and Infosys are on a belt-tightening mode. Cognizant, which is fighting to get back to a growth curve, recently announced a programme to simplify the way the company works and lower its cost structure. The company would eliminate 10,000 to 12,000 mid-to-senior level employees from their current roles. Brian Humphries, the Chief Executive Officer, said that 12,000 was a gross reduction number and that the net reduction would be 5,000 to 7,000 roles since the company aims to re-skill 5,000 associates, thereby lessening the impact.
More than IT, it is the telecom sector that is caught in a quagmire. The recent turn of events - the Supreme Court's ruling on AGR (adjusted gross revenues) and VRS (voluntary retirement scheme) of BSNL and MTNL - might result in significant shrinkage in the headcount of the industry, both direct and indirect.
The telecom sector today employs over 2,40,000 people directly between the three private operators, Bharti Airtel, Vodafone Idea and Reliance Jio, and BSNL/MTNL. With nearly 90,000 BSNL and MTNL employees already opting for VRS, the sector's headcount is expected to fall over 1,50,000. In fact, the situation might worsen if the number of private operators slips. "If one of the operators ceases to exist, that will reduce headcount by another 15,000. If two cease to exist, it will go down by 30,000-32,000 employees," says Rajan S. Mathews, Director General at the Cellular Operators Association of India.
The impact of such an event is expected to cut across other sectors such as banking, consulting, original equipment manufacturing, as well as ancillary software companies. As per one estimate, indirect employment in the telecom sector is two-three times the number of people employed directly. Given India's demographic pressures, this is troubling news and only adds to the distress in automobiles, textiles and a whole host of small businesses that keep India's young workforce employed.
(With inputs from Joe C. Mathew, Goutam Das, Manu Kaushik, Sumant Banerji, P.B. Jayakumar and E. Kumar Sharma)
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